By Yash Tandon*
South Centre
August 29, 2008
For thirty years (from mid 1970s to the end of the last century) many governments in the South, especially in the low and middle-income countries, had surrendered their right to make macroeconomic policies over to the Bretton Woods Institutions (BWIs) -- the International Monetary Fund (IMF) and the World Bank (WB). The BWIs` so-called Structural Adjustment Programmes (SAPs) advocated, among other things, free market liberalisation, fiscal austerity, privatisation and marketisation of essential social services such as health, education and water. The most potent tool for enforcing SAPs was the so-called "development aid", or Official Development Assistance (ODA). Looking back it is truly amazing that even tiny amounts of ODAs with BWI conditionalities were able to tie up the entire national revenues of these countries and shape their "development" strategies. This is because the politicians and bureaucracies of these countries had internalized the "Washington Consensus", the ideological bedrock of these policies. For this reason, none of these governments ever pointed out that the so-called "consensus" was never negotiated in any intergovernmental process, either in the United Nations, or even within the BWIs.
However, these policies were fundamentally flawed, as the wisdom of hindsight has shown. Presumed, among other things, to weed out inefficient industries in the South and make those left behind more competitive in a globalizing world, as argued by the BWIs, these policies led, instead, to rapid deindustrialisation of most of these countries, especially in Africa and Latin America. The civil society organisations (CSOs) in these countries were the first ones to raise the alarm. The effects of SAPs were disastrous for especially the poorer sections of the populations. In the 1990s protests against the IMF induced policies became widespread, and food riots spreaWashingtond from one country after another. The CSOs launched a global campaign against the BWIs under the clarion call "50 years are enough". That, however, did not end the domination of the BWIs. They decided that it was time to involve of the civil society. The BWIs initiated the so-called PRSPs (Poverty Reduction Strategy Papers), and for awhile successfully marketed these as a "step in the right direction" - i.e. passing the "ownership" of the SAPs to the countries themselves and involving the CSOs -- presumptive representatives of "the grassroots". With generous funds from Northern donors a large number of Southern CSOs got co-opted into what looked on the surface like "people's involvement" in PRSPs, but what in fact was a donors/BWIs driven predetermined agenda.
Almost another decade went by, and the PRSPs also failed, their cover of "recipient country ownership" blown by the continuing failure to lift the masses in the so-called "rising ride of globalization". Poverty remained stubborn, despite IMF/WB anodyne figures that pretended that things were better. Unable to provide better strategies, the donors and the BWIs shifted the blame to Southern governments for enduring poverty. The macroeconomic policies, they argued, were not flawed; the problem lay with poor governance, corruption, and lack of Southern government accountability to their populations. Between 1991 and 2004, the BWIs and donors shifted their aid conditionalities from purely macroeconomic policies to governance. According to figures computed from World Bank data, the Financial and Private Sector Development conditionalities leveled out, but the conditionalities associated with the Public Sector and Governance and Rule of Law steadily increased from 10 percent in 1996 to 45 percent in 2004. (See Y. Tandon, Ending Aid Dependency, South Centre and Fahamu, 2008). According to UNCTAD, during 2003-05, the rich countries committed $1.3 billion of ODA funds to improving governance in the LDCs, and only $12 million to agricultural improvement.
It is also about this time that the language of "aid effectiveness" emerged in the vocabulary of the donors and the BWIs. The Paris Declaration on Aid Effectiveness (PDAE) of the Organisation of Economic Cooperation and Development (OECD) emerged from this background. In a closely argued analysis, Ending Aid Dependence shows that the underlying basic philosophy of PDAE is that for aid to be "effective", the governance of the recipient countries needs to be improved, and be accountable to the donors and domestic CSOs. PDAE argues skillfully, using laudable principles such as ownership, mutual accountability and aid predictability. As with the Washington Consensus, however, the PDAE is pretending to be a "consensus" position, but it was never negotiated through any intergovernmental regular process. Once again, like with PRSPs, the donors and the BWIs have partially succeeded in getting some Southern CSOs on their side. The PDAE is particularly appealing to them because they have genuine complaints about the democratic deficit and structurally embedded corruption of their governments. They might see PDAE as a weapon of struggle for democracy in their countries. As they did with the PRSPs in the 1990s, the CSOs argue that the PDAE is a "step in the right direction". The major weakness of their position, however, is that in the process of endorsing the PDAE, they have surrendered their national policy space -- and responsibility -- over to the donors and the BWIs. The thirty years SAPs and PRSPs of the last century were a tragedy. Do the CSOs of the South wish to repeat the tragedy for the next thirty years by surrendering their national democratic space over to the donors, the OECD and the IMF/WB over whom they have no control?
About the Author: Dr. Yash Tandon is the Executive Director of the South Centre, an Intergovernmental think tank of the developing countries. Dr Tandon's long career in national and international development spans as a policymaker, a political activist, a professor and a public intellectual. He was deeply involved in the struggle against the dictatorship of Idi Amin and has spent time in exile. Dr. Tandon is a national of Uganda and received his degrees in economics and international relations from the London School of Economics, UK.
